Leverage means the fixed commitment of the organization. The fixed commitment of the organization can be classified into two different categories viz fixed cost of operations and fixed cost of servicing. The fixed cost of operations are pertaining to the investment decisions and the fixed cost of servicing with reference to the financing decision.
Fixed cost of operations – Investment decisions.
Fixed cost of servicing – Financing decisions.
If Revenues are more than the Variable Cost and Fixed Cost, that is called favorable or otherwise unfavorable.
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